Electric cars are cheaper to fuel than gasoline cars. The figures are that the gasoline to drive a given distance is more expensive than the electricity to drive the same distance, usually. With gasoline the fuel-cost-per-mile is about $0.10, and on electricity it's about $0.03. The more you drive on electricity, the more you save. Let's take a look this economic advantage, puzzle over what it means, and how to take advantage of it.
We'll only talk about fuel cost here, not the total cost of ownership. Elsewhere I've written about total cost of ownership in greater depth. The primary economic advantage of electric vehicles is the fuel cost savings[EV-Economics]. What follows is a summary.
Fuel cost per mile
The basic fact is that electricity is a cheaper fuel than gasoline, to go the same distance. The fuel cost figures above are based on certain electricity and gasoline prices and are therefore subject to increases/decreases in both. The basic calculation is very easy, and demonstrates the advantage.
fuel reqd = distance * fuel/mile fuel cost = fuel reqd * cost/unit
For gasoline car let's assume a fairly fuel efficient model (30 MPG), and a modest 90 mile trip.
fuel reqd = 90 miles * ( 1 / 30 MPG ) = 3 gallons fuel cost = 3 gallons * $3.00 / gallon = $9 cost/mile = $9 / 90 miles = $0.10/mile
Traveling 90 miles in a 30 MPG car requires 3 gallons, and at $3/gallon that's $9 in fuel cost. Of course gasoline prices are swinging pretty wildly the last few years, depending on the latest geopolitical power games being played in a given year.
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For an electric car getting 3 miles per kiloWatt-hour, and electricity costs of $0.12/kiloWatt-hour, the numbers add up like this:
fuel reqd = 90 miles * .30 kWh/mile = 27 kiloWatt-hours fuel cost = 27 kWh * $.12/kWh = $3.24 cost/mile = $3.24 / 90 miles = $0.036/mile
That right there is the fuel cost savings: $9 to travel 90 miles on gasoline, and $3.24 to travel 90 miles on electricity.
Obviously this argument is relying on simplifying assumptions:
- $3/gallon was a fairly typical price until gasoline prices fell considerably in 2015. The wildly swinging gasoline price is due to geopolitical power games, not market reality, and is likely to swing wildly upward again.
- $0.12 per kiloWatt-hour is the national average in the U.S.
- 30 MPG is a common enough fuel efficiency
- The Nissan Leaf consumes 300 Wh/mile
It's easy to go back through those calculations with other figures. For example, to make gasoline be the lower fuel cost, for a 30 MPG car, requires a gasoline price under $1 per gallon. We're never going to see gasoline at that price again, right? Well, as of this writing (January 2016) I see the lowest gasoline price is about $1.35/gallon in Missouri and Kansas, the national average is $1.84 and falling quickly. Maybe it will hit $1/gallon in some areas, but the many geopolitical power games going on can easily create conditions for the price to careen upwards again.
For example, as of this writing Iran and Saudi Arabia are fighting on opposite sides of civil wars in both Yemen and Syria, with the risk of an open war. The Straits of Hormuz could easily get blocked, causing world oil prices to skyrocket. And the current extremely low oil price is causing tremendous difficulty for countries who grew dependent on high oil prices.
Another impact on this comparison is higher fuel efficiency. In the U.S. the automakers are being required to increase fuel efficiency to meet tighter CAFE standards, which mean 54.5 MPG by 2025. Obviously a higher fuel efficiency car uses less gasoline. At 45 MPG the car only requires 2 gallons to travel 90 miles for a $6 fuel cost ($3/gallon).
fuel reqd = 90 miles * ( 1 / 45 MPG ) = 2 gallons fuel cost = 2 gallons * $3.00 / gallon = $6 cost/mile = $6 / 90 miles = $0.666/mile
Likewise $2 per gallon gasoline costs $6 to travel 90 miles in a 30 MPG car, or $4 for a 45 MPG car.
The point is that, in most conditions, electricity is a cheaper fuel than gasoline. Electricity is enough cheaper to remain attractive unless gasoline's price falls considerably. The difference between gasoline and electricity fuel costs are one driving force pushing us towards electric vehicles.
How far to drive to pay for the car?
Electric cars have many cost advantages, the biggest of which is fuel cost savings.
Going by $0.10/mile for gasoline and $0.03/mile for electricity, it's a $0.07/mile savings. The actual savings of course depend on the current gasoline and electricity price conditions.
How many miles does it take to equal $30,000 worth of savings? That's about 428,000 miles, which is a bit more than we're likely to drive an electric car. At 100,000 miles, however, there are $7000 worth of fuel cost savings. That's significant enough to pay for the electric car price premium.
Tipping the economic balance in favor of electricity
If this holds true, that the more we drive on electricity the more we save, it makes sense to drive as much as possible on electricity. Therefore, the affordable 200+ mile range electric cars will let us drive much more on electricity, and reap even more savings. The first of these cars is due on the market starting in late 2016, the Chevy Bolt, with several more starting sales in 2017-8.
The crux of this argument is the 200+ mile range electric car can cover a broader range of driving duties than EV's with 80 mile range. The 200 mile round trip can be performed with home base charging, while with shorter range EV's a charging session or two is required.
It becomes far more feasible to take long trips. The general recommendation is to drive the EV around town, and rent a gas car for longer trips. But as we showed earlier in the book, medium length trips become feasible with a 200+ mile range electric car. St. Louis to Chicago, 300 miles, is easily doable with a stop halfway for a fast charge.
Therefore, with a 200+ mile range EV an electric car owner has an ever-shrinking reason to own or rent a gasoline car.
The Chevy Bolt MSRP is expected to be $37,500, and the Tesla Model 3 MSRP has been promised to be $35,000. For the price we pay for today's 80-100 mile range EV's, we'll be able to buy a 200+ mile range car.
That's the first step to tipping the balance in favor of EV's -- lowering the cost per mile of range.
Another aspect to driving more miles on electricity is the public fast charging infrastructure. The effective way to take an electric road trip is with fast charging. The more fast charging infrastructure, the more we'll take our EV's on long trips.
That's the next step to tipping the balance -- the buildout of fast charging infrastructure.
The last step has to do with the price differential between electricity and gasoline. As long as there's a significantly lower cost per mile EV's have a clear advantage. The closer together those prices come, the smaller the advantage.
Charging cost at home versus in public
The electricity cost advantage works at the cost per kiloWatt-hour we get at home on our home charging station. The cost at public charging stations is much higher than at home. We need to understand it to get a clear picture, because the electricity price advantage can evaporate.
Electricity cost is pretty stable. It's set by government agencies, because (in the U.S.) electricity is a tightly regulated monopoly business. While electricity costs rise from time to time, they don't swing wildly, and the rate of increase is very low. We're comfortable with predicting $0.03 per mile for electricity when the car is charged at home.
The cost can be even lower with solar panels on the home. No longer would you be paying the electricity company, because you're supplying your own electricity. And not only would those panels be offsetting electricity cost, they'd offset gasoline cost.
The problem is that when we charge away from home the cost is much higher. And, unfortunately, there isn't a standard fee structure but a hodgepodge of different fees at different stations. At some stations you pay by the kiloWatt-hour, at other stations by the hour, and at some of those stations your first hour (or two) might be free but you pay by the hour afterward. There are even stations which charge no fee, and it's completely free to recharge. The fee structure depends on the station owner, what they think is fair, and their business model.
At some stations near where I live, the cost had been $1 per hour and was raised to $2 per hour. At some other stations nearby, the first two hours is free and $2/hour afterward. At a nearby store the fee is $3 for the first hour, and $1.50/hr afterward. Some parking lots offer free charging, but you still pay for parking, while others have a charging fee on top of the parking fee. At most area stations the fee is $0.49/kWh for level 2 charging, and $0.59/kWh for DC fast charging.
In short, fees for using public charging vary wildly.
At $0.49/kWh the cost is 4x the average price at home. Repeating the earlier calculation:
fuel reqd = 90 miles * .30 kWh/mile = 27 kiloWatt-hours fuel cost = 27 kWh * $0.49/kWh = $13.23 cost/mile = $13.23 / 90 miles = $0.147/mile fuel cost = 27 kWh * $0.59/kWh = $15.93 cost/mile = $15.93 / 90 miles = $0.177/mile
Whoops, where did that fuel cost saving go? This is more expensive than gasoline.
At $1 per hour, assuming a 6 kiloWatt charging rate, we'd pay the equivalent of $0.16 per kWh. At $2 per hour, it equals to $0.32/kWh.
fuel reqd = 90 miles * .30 kWh/mile = 27 kiloWatt-hours fuel cost = 27 kWh * $0.16/kWh = $4.32 fuel cost = 27 kWh * $0.32/kWh = $8.64
That's still better than the fuel cost for $3/gallon gasoline, but it's not as good as when we charge at home.
The high cost of free charging
Some public charging do not charge a fee. That's great isn't it, the fuel cost suddenly becomes $0/mile and we can thumb our noses at the unfortunate gasoline car owners. There's a raging debate among electric vehicle owners about charging station fees.
Why, the question goes, is it $0.49/kWh when the electricity costs only $0.12/kWh? As we saw this really throws all the equations and economic advantage claims out of whack.
Any business offering a service, for a price, has to answer these questions:
- What's the cost of providing the service?
- What's the going price for similar services?
- What profit margin does the company need to make?
Charging station network operators pay for more costs than just electricity. They pay for the amortized cost of buying the charging station, for maintenance of the station, for advertising, administrative costs, a share of the cost of the parking spot, etc.
One thing we're facing is that charging stations are often broken. Host sites might not be getting enough revenue to justify spending dollars on maintenance. And of course they can't push the price too much higher, because $0.49/kWh is already more than the cost of gasoline.
One approach is to place big prominent advertising screens on the charging station. As distasteful as the ubiquitous advertising presence is, it can provide the revenue necessary to pay for the service. And, it's not like the gas pumps at gasoline stations are devoid of advertising - there's often video screens at each pump pushing products while you're pumping gas.